Decarbonization – The Adconia Approach

Decarbonization is the key word in sustainability strategies

„To limit global warming to less than two degrees, a climate-neutral society is envisaged by 2050.“ That’s the core goal of the 2015 Paris climate agreement, with an interim target of reducing carbon dioxide (Co²) emissions by at least 55 percent net by 2030, according to the EU’s latest climate law released Wednesday this week.

Accordingly, Germany is also to become largely greenhouse gas neutral by 2050. This is the aim of the German government’s Climate Protection Plan 2050 and the Federal Climate Protection Act. As Germany’s second-largest emitter of greenhouse gases, the industrial sector has a crucial role to play in this context in order to achieve a climate-neutral and circular economy.

As a result, decarbonization has advanced to become the keyword in the sustainability strategies of German companies. More precisely, it refers to the shift to a way of doing business that sustainably reduces and offsets carbon dioxide emissions. The long-term goal is to create a CO²-free global economy. And the targets for achieving this are being tightened steadily.

Carbon accounting as the basis for targeted measures

However, before actual decarbonization by means of reducing or offsetting emissions, the first step is to determine and assess the CO² emissions that actually occur – the so-called CO² footprint or corporate carbon footprint (CCF). This describes all company-related greenhouse gas emissions, including upstream and downstream company processes, and can be differentiated into three classes or „scopes“.

Scope 1 includes the direct and self-generated emissions of a company, while Scope 2 includes all emissions that are indirectly related to the company through purchased energy (e.g. electricity, district heating). Finally, scope 3 emissions are all other emissions that arise in upstream and downstream processes as part of the company’s activities. These include, for example, emissions from purchased goods and services, business travel, waste disposal, investments, transportation, and others.

How high will the costs incurred by the CO² deduction be?

And it is precisely in determining and evaluating one’s own emissions – regardless of the objective – that the greatest challenge lies for most of our customers. In addition, the CO² total must be determined not just once, but permanently and continuously for a large number of different product groups, raw materials and assemblies, as well as services.

But only based on this the relevant levers can be identified and targeted measures be formulated. And only in this way is it possible to measure the sum of the future costs incurred by companies as a result of the pricing of emissions per ton of CO² in the form of the rising CO² deduction.

The influence of the supply chain on decarbonization

In our day-to-day consulting work, we regularly notice how little transparency our clients have about their own supply chain. Although names of suppliers and materials as well as prices and specifications are known, they usually do not have much more substantial information.

For us, supply chain transparency means the systematic, permanent collection of all supplier information relevant to our customers own risk management, commodity group strategies and sustainability. Particularly with regard to the environment, it is not enough to send out a questionnaire to suppliers. It is important to build up an own CO2 balance in order to be able to evaluate different scenarios in the future.

Many purchasing departments shy away from the initially seemingly high initial outlay for their own employees and suppliers when surveying their Scope 3 emissions. Or they do not know how to obtain or evaluate information, let alone implement optimization measures.

Structured methodology enables targeted measures and quick successes

At Adconia, we use a methodology based on the most value principle. The effort invested in a product group is clearly based on the value share of the respective product group. Flat benchmark values up to collaborative strategies in terms of long-term supplier and decarbonization partnerships are the result.

This approach enables the rapid identification of the levers that are actually relevant and have the greatest influence on the CO2 balance of the purchasing volume. We then focus on these in our implementation projects and develop individual or collaborative optimization strategies.

Where is your break-even point?

The current evaluation of the costs of a ton of CO² emissions will not yet play a role in many decisions in purchasing departments. In TCO considerations, especially for capital goods, energy consumption from installation to dismantling is certainly already included, but for production material only very rarely. And above all, energy consumption during production and transport is certainly not yet included in TCO considerations at all.

In our opinion, the country’s purchasing departments will have to redesign their calculations of bid comparisons at the latest from a price of €150 per ton of CO² emissions.

How do you see it?

Adconia provides guidance for the electronic procurement process

As Adconia GmbH, we advise our customers with the experience gained from more than 200 projects over more than 15 years – on issues related to purchasing, supply chain and the digitalization of processes. Our goal is always to increase the profit contribution of purchasing through cost reduction, process automation or the qualification of the purchasing team.

With a correspondingly broad wealth of experience, precise knowledge of everyday purchasing and a high level of professionalism, our consultants carry out training measures at eye level. We do this – depending on the requirements – both as a sparring partner for specialists and managers with many years of experience and as a trainer for seasoned purchasing professionals and young professionals.

Tim Rohweder
Partner, ADCONIA GmbH
Jessica Murawski
Consultant, ADCONIA GmbH